In 2015, Coty Inc. bet big, spending $12 billion to merge with Procter and Gamble Company’s cosmetic and fragrance brands. Coty is now struggling tremendously due to the bet, and now, the company needs Kylie Jenner’s expertise to get back on top.
The Wall Street Journal reports that a better strategy now is to go after rising stars instead of mergers with huge companies on their way out. Although mistakes will be made, the price tag is much smaller than a $12 billion merger gone bad.
Coty is using this approach and going after control of Jenner’s Kylie Cosmetics, which is now for sale. Coty is the lead bidder. The $600 million Coty would pay is mere pocket change compared to past ventures.
Andy West, a senior partner at the consulting firm McKinsey & Co. asks, “What type of M&A strategy creates the most value for large corporations?” He answers, “We crunched the numbers, and the answer was clear: Pursue many small deals that accrue to a meaningful amount of market capitalization over multiple years instead of relying on episodic, ‘big-bang’ transactions.”
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